Acting On Conviction: How We Can Become More Confident

Two money managers at a hedge fund conduct research and arrive at similar conclusions. Both enter positions to take advantage of the directional move they believe will result from upcoming central bank actions. Soon the market reverses on them, responding to a slew of weak economic reports. The first manager fears a drawdown in profits and doubts the original research, exiting the position. The second manager retains confidence in the view, believing that nothing in the recent reports changes the macroeconomic fundamentals driving central bank decisions. That manager adds to the position to take advantage of the better prices. When the market subsequently reverses and moves as expected, one manager is out of the position and makes no money. The other harvests a significant profit.

In this all-too-common situation, two people have the same research, the same idea. One makes money, one does not. The difference is confidence in one's view: the capacity to hold to a conviction in the face of uncertainty.

I see this situation play itself out repeatedly. Recently two professionals told me they were thinking of changing jobs. An opportunity was posted that required significant experience. One person put their best foot forward and went to an interview. The other felt unqualified for the position and did not apply. During the interview, a second opportunity came to light, which was tailor made for the candidate, resulting in an attractive offer. The second professional never had a chance to be considered for the post and spent many more months in fruitless searches.

What is confidence? How can we think and act with greater belief in ourselves?

Still, confidence matters. Research suggests that self-confidence contributes to success and success helps build confidence. Noting a gap in confidence between women and men, Kay and Shipman observe that success depends as much on confidence as competence. Women are likely to apply for a promotion when they meet 100% of the criteria for the new position; men are likely to apply if they meet half of those criteria. Over time, that contributes to a very real gender gap.

Too, confidence shapes how we're viewed by others. Kay and Shipman cite a study in which a group of students were asked about their knowledge of historical events, including fake events. The students who displayed overconfidence by claiming to have knowledge of the fake events were significantly more likely to be rated favorably by peers than those who were more accurate in their self-appraisals.

What separates genuine confidence from mere bluster and bravado? I would argue that the confidence that we find enhancing is actually optimism, as applied to the self. The self-confident person is one who radiates optimism about future outcomes. Early in my career, I sought a career shift and applied for a position on a medical school faculty directing a counseling service. I had never held a position in a medical school and had never gone to medical school. By most objective measures, I was less than an ideal candidate for the post. Before my interview, however, I spent long days researching the psychological stresses of medical school and residency training. By the time I interviewed, I shared a literature review with the recruitment committee and explained in detail how I would tackle the challenges of the position based on similar challenges at my current Ivy League campus. After I was hired, I was told that my preparation and confidence were factors that swayed the committee.

The confidence I felt was nothing more or less than optimism. Medical education stress was a problem to be solved and I believed that, with enough observation and study, I could contribute to a solution. That I had never worked in a medical school was irrelevant; my confidence stemmed from having tackled similar thorny problems at my academically demanding undergraduate campus.

Once we see the link between confidence and optimism, we can appreciate why confidence is important to success. Research links optimism to favorable health and emotional outcomes, including increased well-being and reduced stress. Seligman's work on learned optimism--a counterpoint to his earlier work on learned helplessness--stresses that optimism comes from a way of thinking that promotes efficacy in the face of adversity. As Margie Warrell notes, confidence is based on a fundamental belief: the belief that one can succeed.

So how can we become more self-confident investors, job-seekers, and team members? The answer lies in the recognition that confidence is something we do, not something we have. Confident people look at situations they face and scan for similarities to similar situations that they have mastered. Their optimism leads them to first consider: if I was able to navigate X and X has similarities to Y, I should be able to master Y. That optimistic self-talk is not mere bluster; it is the result of looking at challenges creatively to find commonalities with past, mastered situations.

Once we recognize that confidence is a function of how we process information, we can become better and better at acting with confidence. That's when we gain confidence in our ability to act confidently, our ability to perceive in new challenges links to our past successes.